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A data disconnect can put any company in Netflix’s muddy boots

by Scott Wallask

July 13, 2011

By Scott Wallask, SAP Experts

Maybe you heard that DVD and movie streaming giant Netflix stepped into the mud this week by announcing a 60% price increase as part of a restructuring of its rental plans.

Netflix announced the switch on its corporate blog, and within a day had more than 6,300 comments, many of them predictably negative toward the idea.

Netflix may have truly hurt itself with this announcement, but don’t think it’s just Netflix that is in danger here. Any company that lives in the magical bubble known as “We Know Best” can easily underestimate what customers want.

The key is researching your historical data and customer wishes and then reacting reasonably based on the results you discover. I don’t know what research Netflix conducted, but there is little doubt now that the actions it took based on that research were ill-thought. Its executives lost touch with their meal ticket. And when that happens to any company, the reaction may be swift.

Data mining is one way to cross-reference various information points about custome rs or trends and aggregate them. We’ve run several articles in BI Expert about data mining, including this one I like from Anton Karnaukhov, “Take Advantage of Association Analysis and See Your Sales Grow.”

And believe it or not, Karnaukhov actually uses a DVD and Blu-ray store as an example in his piece. Clearly this man is an expert in BI and an oracle.

Karnaukhov in particular discusses association analysis, which helps companies identify patterns and formulate rules that are applicable to a set of data.

But customer research doesn’t have to be a once-a-year, scientifically valid activity. Every time your interaction center agents talk to customers, research occurs. Each sales representative conversation with a lead yields useful information. All service requests represent opportunities to learn more about whom you sell to.

Your SAP BI systems should be set up to capture this data and aggregate it. If it isn’t, put it on your wish list now and schedule that meeting with your executives and IT folks. Otherwise, you might find yourself in Netflix’s position, fielding dagger-like online comments such as this one: “What overpaid exec thought this brilliant plan up?”

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